Cataldo and Inspector-General in Bankruptcy (Taxation)

[2018] AATA 2596

Cataldo  and Inspector-General in Bankruptcy (Taxation) [2018] AATA 2596 (4 July 2018)

Division:TAXATION AND COMMERCIAL DIVISION 

File Number:           2017/5946 

Re:Theresa Cataldo 

APPLICANT

Inspector-General in BankruptcyAnd  

RESPONDENT

DECISION

Tribunal:F D O’Loughlin, Deputy President

Date of decision:     4 July 2018

Date:3 August 2018  

Place:Melbourne

The Tribunal affirms the decision under review.

........................................................................
Deputy President

Catchwords

Application to Inspector-General in Bankruptcy for review of amount of remuneration claimed by trustee of bankrupt estate – application made outside of prescribed 28 day period – application for extension of time due to special circumstances – special circumstances not found – decision affirmed

Legislation

Bankruptcy Regulations 1966 (Cth) Regs 8.12E(1), 8.12E(2), 8.12E(3), 8.12E(4)

REASONS FOR DECISION

F D O’Loughlin, Deputy President

3 August 2018

1. Ms Cataldo was a creditor of the Bankrupt Estate,[1] who was owed approximately $323,647 and who received only $14,467.03, being a dividend of 4.47 cents for every dollar she was owed.  Understandably, Ms Cataldo was disappointed with that outcome.  

   [1]The bankrupt estate of Paraminder Grewal.

2. Ms Cataldo seeks permission to seek a review of the Trustees’[2] remuneration beyond the 28 day period.

   [2]The Trustees of the Bankrupt Estate.

Facts

1. The relevant chronology of events is as set out in paragraphs 1 to 21 of the Respondent’s Statement of Facts, Issues and Contentions, which were not disputed and which were cross referenced to relevant T documents,[3] as follows:

   [3]Documents filed with the Tribunal pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Cth).

   1.On 13 September 2013, the Trustees were appointed as joint and several trustees of the [Bankrupt Estate].[4]

   [4]Page 232 T documents.

   2.On 11 October 2013, the Trustees issued a report to creditors[5] which relevantly sought creditors’ approval of remuneration of $43,198.50 plus GST, being:

   [5]Commences at page 231 T documents.

   (a)$8,198.50 plus GST for remuneration incurred between the period 13 September 2013 to 11 October 2013; and

   (b)$35,000 plus GST that he estimated would be incurred to conclude the administration.[6]

   [6]Page 252 T documents.

   3.The Trustees noted that the prospective remuneration of $35,000 (GST exclusive) was based on an estimate only of the work necessary to complete the administration of the estate and that further approval would be sought from creditors if additional work was required.[7]

   4.The Trustees also noted that disbursements would be incurred as an additional cost in the administration of this estate.[8]

   5.On 7 October 2015, the Trustees issued a report to creditors[9] which relevantly sought creditors’ approval of remuneration of $20,358 plus GST, being:

   (a)$15,358 plus GST for remuneration incurred during the period 23 January 2015 to 7 October 2015; and

   (b)$5,000 plus GST that the Trustees estimated would be incurred for the period 7 October 2015 to conclude the administration.[10]

   6.Subsequently, creditors approved the Trustees’ remuneration to a sum of $58,419.00 plus GST for the period 13 September 2013 to the finalisation of the administration.  The Trustees’ report also attached his Remuneration Claim Notice (RCN) claiming $38,061 plus GST of the $43,198.50 plus GST approved by creditors, for remuneration incurred for the period 13 September 2013 to 23 January 2015.[11]

   [7]Page 252 T documents.

   [8]Page 252 T documents.

   [9]Commences at page 291 T documents.

   [10]Page 292 T documents.

   [11]Page 298 T documents.

   Timeline Giving Rise to The Application

   7.By email dated 14 December 2015, the Applicant … requested that the Trustees provide her with a breakdown of their costs.[12]

   [12]Page 281 T documents.

   8.By email dated 14 December 2015, the Trustees advised the Applicant that a breakdown of their costs was detailed in their RCN dated 7 October 2015.  They provided a further copy of the RCN.[13]

   [13]Page 280 T documents.

   9.On 17 December 2015, the Trustees issued a report to creditors confirming the payment of a first and final dividend to creditors.[14]

   [14]Commences at page 285 T documents.

   10.The Applicant received a dividend of $14,467.03, being a dividend at the rate of 4.47 cents.[15]

   [15]Page 158 and 158 T documents.

   11.The Trustees’ report also attached a summary of the receipts and payments in the estate and a RCN for remuneration claimed totalling $57,190 plus GST (which included the remuneration claimed on 7 October 2015).[16]

   [16]Page 287 T documents.

   12.By emails dated 17 and 20 January 2016, the Applicant requested that the Trustees provide an itemised statement outlining the work they completed in the estate and an explanation of the hourly rates of each of the staff members and why they vary.[17]

   [17]Pages 318 to 320 T documents.

   13.By email dated 20 January 2016, the Trustees offered to meet with the Applicant to discuss her concerns.[18]

   [18]Ibid.

   14.By email dated 1 February 2016, the Trustees:

   (a)Explained why the hourly rates of the same staff members differ.

   (b)Confirmed that creditors voted in favour of their resolutions seeking approval of their remuneration, noting further that the Applicant did not vote against their remuneration.

   (c)Explained that the increase in remuneration from the initial estimate of $48,198 (GST exclusive) on 11 October 2013 to a total of $58,419 (exclusive of GST) on 7 October 2015 was due to the complicated nature of this administration, including the claim against the Bankrupt’s former property by Mr Chirag Grewal.

   (d)Attached a copy of their ‘Work In Progress’ (WIP) reports which outlined the units of time charged and provided a brief description of the work completed by each team member who worked on the administration.[19]

   [19]Page 332 T documents.

   15.In early February 2016, the Applicant made a complaint to the Financial Ombudsman Service in relation to the conduct of the Trustees.[20]

   [20]Page 422 T documents.

   16.On 6 February 2016, the Financial Ombudsman Service advised the Applicant that they did not have any oversight over the Trustees and Grant Thornton Australia Ltd.[21]

   [21]Pages 430 to 449 T documents.

   17.On 18 February 2016, the Applicant again requested that the Trustees provide her with a breakdown of their remuneration and details of the disbursements incurred.

   18.By email dated 24 February 2016, the Trustees relevantly advised the Applicant that:

   (a)Creditors voted in favour of their remuneration.

   (b)Their report to creditors detailed their hourly rates and the qualifications of each staff member.  The Trustees noted further that their hourly rates were in line with industry standards for insolvency practitioners.

   (c)Their RCNs had been sent to the Applicant previously, including by email on 21 December 2015.

   (d)Details of their receipts and payments were set out in their account of receipts and payments dated 17 December 2015.

   19.In March 2016, the Applicant made an application to the Victorian Civil and Administrative Tribunal (VCAT) in relation to her concerns about the Trustees, including their remuneration. On 17 August 2016, the Applicant’s application to the VCAT was struck out for lack of jurisdiction.[22]

   20.In January 2017, the Applicant filed a Writ in the County Court of Victoria (County Court) in relation to her concerns about the Trustees’ conduct.[23]

   21.By order of Judge Saccardo made 23 January 2017, the Applicant was not permitted to file the Writ and Statement of Claim under rule 27.6 of the County Court Civil Procedures Rules 2008 and Cassandra Cebezas of the County Court informed the Applicant of her ability to make an application to the Inspector-General in Bankruptcy (the Inspector-General).[24]

   [22]Page 823 T documents.

   [23]Page 787 T documents.

   [24]Page 785 T documents.

2. The facts set out in each of those paragraphs are referenced to and supported by contemporaneous documents filed with the Tribunal and provided to the Applicant.  Those paragraphs accurately state the chronology of events. 

3. The Applicant has complained to the Inspector-General about the Trustees’ conduct.  While the outcome of that complaint is not presently before the Tribunal, it is appropriate to note that the complaint was investigated by the Inspector-General who has found it to be unsustained. 

4. One of the complexities for the administration of the Bankrupt Estate was the interest of a caveator over the major asset of the Bankrupt Estate.  That interest needed to be dealt with by the Trustees before the asset could be sold and creditors paid anything. 

5. Ms Cataldo was advised as to her rights to seek a review of the Trustees’ remuneration by the Inspector-General under the Regulations[25] at least three times in documents sent to her by the Trustees.  Those documents were included in the materials filed with the Tribunal by Ms Cataldo.  Ms Cataldo must be taken to have been aware of those advices.

   [25]Bankruptcy Regulations 1966 (Cth).

6. Rather than seek review of the Trustees’ remuneration as provided for within the 28 day period, Ms Cataldo began three other courses of action to ventilate her dissatisfaction with the Trustees and with the outcome of the administration.  Ms Cataldo had the services of a solicitor at or about the time that notices from the Trustees were provided to her.  

7. Ms Cataldo contends that her medical condition was the reason for failing to seek review within 28 days, and that her medication causes memory loss.  Further, Ms Cataldo asserts that the bankruptcy was the cause of much stress and the Trustees took too long to realise the relevant assets.

Relevant regulations

1. The regulations in force as relevant to the present application are:

   (a)reg 8.12E(1) which is in the following terms:

   (1)A bankrupt or a creditor of the bankrupt … may apply to the Inspector-General for a review of the amount of remuneration claimed by the trustee.

   (b)reg 8.12E(2) which is in the following terms:

   (2)The application must be in writing and must, subject to sub-regulation (3), made within 28 days after the day the applicant receives notification under regulation 8.12C.

   (c)reg 8.12E(3) which is in the following terms:

   (3)The Inspector-General may, before or after the end of the 28 days mentioned in sub-regulation (2), extend the period in which an application for review may be made, if the Inspector-General is satisfied that:

   (a) the applicant and the Trustees have been engaged in alternative dispute resolution processes to try to resolve the matter; or

   (b)it is appropriate in all the circumstances to extend the period.

   (d)reg 8.12E(4) which is in the following terms:

   (4)The Inspector General may extend the period for any period the Inspector-General considers appropriate in all the circumstances. 

   (e)reg 8.12F(1)(a) which is in the following terms:

   (1)       The Inspector-General must refuse to accept an application:

   (a)unless the Inspector-General is satisfied on reasonable grounds that one or more of the following apply:

   (i)the Trustees’ remuneration may have been fixed in a manner that is inconsistent with the requirements of the Act or the regulations; or

   (ii)the Trustee may have acted improperly or without due care and diligence in the administration of the estate; …

   (f)reg 8.12F(2) which is in the following terms:

   (2)However, the Inspector-General may accept an application if the Inspector-General is satisfied that there are exceptional circumstances that justify the review.

The facts and the regulations

1. Ms Cataldo and the Trustees have not been engaged in alternative dispute resolution processes so reg 8.12E(3)(a) is not enlivened and only reg 8.12E(3)(b) needs to be considered: whether it is appropriate in all of the circumstances to extend the request period.  At least one of the considerations to be included in the all of the circumstances analysis calls for consideration of the scheme of the regulations and that scheme includes conditions where the Inspector-General must not conduct a review.[26]  These considerations are the same as reg 8.12E(4) considerations.

   [26]See reg 8.12F(1)(a)

2. As to reg 8.12F(1)(a) matters, reg 8.12F(1)(a)(i) is not enlivened because it is quite apparent that the Trustees’ remuneration has been fixed in a manner that is consistent with requirements of the Act and the regulations.   They have given the notices, estimates and revised estimates as required, and they set out the relevant charge out rates.  And it is not apparent that reg 8.12F(1)(a)(ii) is enlivened.

3. For reg 8.12F(2) purposes, exceptional circumstances are circumstances that are materially out of the ordinary course of events.  Ms Cataldo’s circumstances are not of that kind.

4. The relevant circumstances are that:

   (a)it is apparent that the Trustees have been attentive to Ms Cataldo’s representations in what has transpired to be a more complex than usual administration, and an administration that attracted a complaint about conduct that was investigated and found to be unsustained, as noted above, that ultimately attracted remuneration charges of approximately $57,160 and disbursements of approximately $33,897.  It is not apparent that:

   (i)the Trustees’ remuneration has been fixed in a manner inconsistent with the requirements of the Act or the regulations (as noted previously); or

   (ii)the Trustees have acted improperly and without due care and diligence in the administration; 

   (b)to the contrary, the Trustees have adopted the customary and accepted procedure of providing estimates of remuneration, revised estimates as complexities arose, and explained the basis on which they charged for the services charged for and the Inspector-General’s findings in response to conduct complaints are not to be ignored; and

   (c)while dissatisfied with an outcome, Ms Cataldo has engaged various fora to ventilate dissatisfaction with the Trustees and had legal representation at a time when she could have sought the Inspector-General’s review within time.  

5. While a disappointing outcome for Ms Cataldo, the outcome of the amount of the charges as a percentage of a small bankrupt estate is not out of the ordinary.  While Ms Cataldo can be accepted as having medical conditions, they ought not be seen as a limiting factor making her unable to engage with the review process provided for under the Regulations.   Ms Cataldo has been able to, and minded to, ventilate her dissatisfaction with the Trustees in other fora. Her circumstances ought not be regarded as preventing her from having sought a review which she now seeks.  There are neither exceptional circumstances within the meaning of regulation 8.12F or circumstances appropriate to allow a review out of time within the meaning of regulation 8.12E.

   DECISION

6. For these reasons the Inspector-General’s decision is affirmed.

17.     I certify that the preceding 16 paragraphs are a true copy of the reasons for the decision herein of Deputy President F D O'Loughlin

....................[sgd]....................................

Associate

Dated 3 August 2018

Date of hearing	4 July 2018
Applicant:	In person
Counsel for the Respondent	Ms C Gobbo
Solicitors for the Respondent	Australian Financial Security Authority